The Organisation for Economic Cooperation and Development has calculated the European Union’s rescue deal for Greece will only slightly reduce the country’s debt.

In its annual report on Greece the economic think-tank said austerity measures will work – if Athens sticks to them – but that it will take over 20 years for the country to get its debt down to more sustainable levels.

Angel Gurria, head of the OECD, said: “After we have overcome this debt hurdle there will come the more difficult question of having sustainable, sustained, growth over the medium and the long term and that requires a very serious structural transformation of the Greek economy, of the Greek administration.”

On the wider situation in Europe Gurria said: “There is no debt crisis in the EU. There is no debt crisis in Europe. There are three countries that have short-term debt issues that are being supported by the EU and the IMF.”

In a veiled criticism, the OECD said Greece is capable of doing better on privatisations and structural changes and that it urgently needs to improve tax collection. It also suggested Greek banks consider mergers with foreign lenders to boost their funding.

It adds that the Greek banking sector is in a difficult situation because of exposure to government debt and says banks will continue to be reliant on European Central Bank funding.